Quinn: For Mark Zuckerberg, even philanthropy can be controversial

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Facebook CEO Mark Zuckerberg speaks at the F8 summit in San Francisco, California, on March 25, 2015. Zuckerberg introduced a new messenger platform at the event. AFP PHOTO/JOSH EDELSONJosh Edelson/AFP/Getty Images

That’s the question dogging Facebook CEO Mark Zuckerberg and his wife Priscilla Chan after their announcement this week that they will donate 99 percent of their Facebook shares — valued now around $45 billion — to “further the mission of advancing human potential and promoting equality by means of philanthropic, public advocacy, and other activities for the public good.”

Cue the outrage, always below the surface when it comes to young Silicon Valley wealth, even more so as the nation grapples with growing income inequality.

It’s gotta be a tax move, right? And talk about great PR!

Our cheering and outrage are both premature, but that’s not surprising. Zuckerberg has become a stand-in for what many wish was different in society. Rich people have power. They can build a hospital wing or buy an island; they can try to stop global warming or pick up a Picasso. Most of us don’t have these choices.

And now they can even do philanthropy the way they want.

Yeah, it’s irritating. We don’t have to curtsy like serfs for the breadcrumbs they throw or cheer their messianic endeavors. But can we wait a few weeks before we run at them with pitchforks? After all, it’s their money, right?

At issue is the Chan Zuckerberg Initiative, which will be structured as a limited liability corporation (LLC). There has been an arcane, technical conversation brewing about whether going the LLC route is more selfish than creating a foundation or making donations outright.

It all depends on what you consider selfish.

A LLC is more like a small business than a traditional tax-exempt charitable organization or foundation. It is relatively new for philanthropy, but it is being used by eBay founder Pierre Omidyar, Laurene Powell Jobs, widow of the late co-founder of Apple, and others. The advantage is that an LLC gives the Zuckerberg family maximum flexibility — they can invest in private companies and nonprofits. They don’t have to report to the state and feds because they are not receiving an immediate tax benefit.

“It’s a pathway to philanthropy rather than philanthropy,” said Russ Hall, managing director of Legacy Ventures, a Palo Alto-based organization that allows individuals and foundations to invest in funds created by venture capitalists for philanthropy. “It’s a wonderful toolset for what he can later do with his philanthropy.”

Jill Dodd, who is the general counsel for the Silicon Valley Community Foundation, said the Zuckerberg initiative is part of a broader trend of companies structuring themselves to have social missions. “It’s an absolute net gain,” she said. “It makes our country more innovative.”

So what’s the problem?

“People are unaware that LLCs can engage in politics,” said Dave Levinthal, a senior reporter with the Center for Public Integrity. “But there are a lot of circuitous ways for wealthy people to pour money into politics. Zuckerberg as an individual could do the same thing.”

As an LLC, the initiative can make donations anonymously to public advocacy nonprofits, which themselves report very little.

The lack of transparency is what bothers me, but there are ways to fix that.

As a possible indication of a desire to be transparent, Zuckerberg and Chan have created a Facebook page for the initiative, including a timeline going back to 2009 of their biggest investments. And Zuckerberg himself has jumped into the public discussion over the initiative and his philosophy in answer to critics.

But disruptive money isn’t always good money. In a society where philanthropy takes the place of what government should be doing — investing in improving education or backing technologies to stop global warming — what the Chan Zuckerberg Initiative does matters. Their billions can make waves.

We don’t want to be their unwitting playthings, unaware of how they are influencing issues that affect us.

“Is a status update enough for the scale of the influence they will have on all of these spheres?” asks Janet Camarena, director of transparency initiatives at the Foundation Center, which collects philanthropy data. “There is no regulated transparency there.”

Zuckerberg and Chan should be applauded for their impulse to be engaged in the world’s most pressing problems.

But they should also give the world a regular window on what they are doing.

The Chan Zuckerberg Initiative benefits from some advantages via a Limited Liability Corporation (LLC):Flexibility: Can invest in for-profit, private and nonprofit organizations or donate to a political group or cause.Timing: Can distribute the proceeds of a stock sale at their own pace. A private foundation normally has to spend 5 percent of its assets annually on a charitable purpose. Limits: The LLC means no limits on lobbying. Disclosure: No need to report to the state and federal government like nonprofit charities do.Source: Susanna Poon, director of philanthropy services at CTC | myCFO, a wealth consulting firm.

Michelle Quinn is a former business columnist for the Bay Area News Group. Prior to that, she was the Silicon Valley correspondent at Politico covering tech policy and politics. She has also covered the tech industry at the Los Angeles Times and the San Francisco Chronicle. She was a blogger for the New York Times.

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